The Fourth Circuit Court of Appeals has upheld a lower court's dismissal of a case involving FS Medical Supplies, LLC, against TannerGAP, Inc., and other defendants. The court ruled that the case lacked subject matter jurisdiction due to issues with the citizenship of the parties involved. This decision affects FS Medical Supplies and its ability to pursue claims related to a contract dispute over personal protective equipment during the COVID-19 pandemic.
In this case, FS Medical Supplies, an LLC, filed a lawsuit claiming breach of contract against TannerGAP and Tanner Pharma UK Limited. The dispute arose when FS Medical learned that the Tanner defendants had entered a direct contract with one of its suppliers. FS Medical initially filed the lawsuit in California state court, but the defendants removed it to federal court, where it was dismissed for lack of personal jurisdiction. FS Medical then attempted to bring the case in the Western District of North Carolina, claiming diversity jurisdiction under 28 U.S.C. § 1332.
The parties involved in this case include FS Medical Supplies, an LLC with members from California, Texas, and China; TannerGAP, a North Carolina corporation; and Tanner Pharma UK, a foreign corporation based in the United Kingdom. FS Medical's claims were complicated by the fact that it had both domestic and foreign members, which raised questions about jurisdiction. The district court dismissed the case after determining that there was no diversity jurisdiction due to the mixed citizenship of the parties.
The Fourth Circuit's ruling, issued on June 25, 2026, affirmed the lower court's decision. Chief Judge Diaz, along with Judges Wynn and Quattlebaum, stated that the diversity jurisdiction statute requires a clear separation of citizenship between the parties involved. The court noted, "Because plaintiff is a dual-citizen LLC, we must test whether diversity jurisdiction is satisfied for each of its members." The judges concluded that FS Medical's foreign citizenship destroyed the diversity needed for jurisdiction.
In its analysis, the court explained that FS Medical's dual citizenship as an LLC meant that both domestic and foreign members must be considered when determining jurisdiction. The court referenced previous cases, including General Technology Applications, Inc. v. Exro Ltda and Grupo Dataflux v. Atlas Global Group, L.P., to support its conclusion that the presence of a foreign member in FS Medical's LLC meant that there was not a suit between "citizens of different States," as required by the diversity statute.
The impact of this ruling is significant for FS Medical Supplies and similar cases involving LLCs with mixed citizenship. The decision clarifies that LLCs cannot simply disregard their foreign members when establishing diversity jurisdiction. This ruling may set a precedent for future cases involving dual-citizen LLCs, emphasizing the importance of accurately assessing the citizenship of all members in jurisdictional disputes.
Looking ahead, FS Medical Supplies may face challenges in pursuing its claims in federal court due to the jurisdictional issues identified in this case. The court's ruling effectively closes the door on this particular lawsuit, but it does not prevent FS Medical from filing a new action, provided it can establish proper jurisdiction. However, the timeline for any new claims may be affected by the statute of limitations, which has been a concern throughout this litigation.